Setting the plan contribution rate for a SEP-IRA

[albany-berkeley]

Where am I supposed to decide on, and set the plan contribution rate for a SEP-IRA?

[fanfare]

do you have employees ?

[albany-berkeley]

no, self-employed

[dmertz]

There is no place that you need to enter the plan rate itself.  If you mark the Maximize box in TurboTax for a SEP plan, TurboTax assumes the maximum permissible base plan rate of 25% which works out to the maximum permissible SEP contribution for the self-employed of 20% of net earnings.  (Net earnings = net profit minus the deductible portion of self-employment taxes.)  Any contribution less than the maximum permissible implies a base plan rate of less than 25%.  If you make a SEP contribution of less than the maximum permissible you simply enter the amount contributed and do not mark the Maximize box; it doesn't matter what the plan rate actually works out to unless you have eligible employees for whom you also must make SEP contributions.

[albany-berkeley]

Thanks, this is very helpful.  So there's no fixed % rate that must be used year after year, right?  I can decide which rate (or amount if only me) as long as it's not more than the maximum allowed, and this can vary year to year?

[dmertz]

Correct.